Analysis | Big Questions

Europe Should Support China-CEE Cooperation

Thirty years ago, when I travelled from Budapest to Pécs, a major cultural city in southwest Hungary, the journey took 3.5 hours by train. I took the same train ride recently, and it still took 3.5 hours. It is a sad example of the travel conditions between the major cities in Hungary, as well as in Central and Eastern Europe (CEE) more generally. Much has happened in thirty years: the end of the Cold War, the enlargement of the European Union, and many rapid developments outside of Europe. Yet Eastern Europe’s transportation infrastructure remains essentially unchanged.

Something else remains unchanged in the field of transportation infrastructure. Thirty years ago, every road and train in Eastern Europe led to Moscow. Today, every road and train in Central and Eastern Europe leads to Brussels and Berlin. But look at the map of Western Europe, and you’ll see not only corridors between east and west, but also between north and south. Why is there an absence of north-south corridors after nearly thirty years of transition and more than ten years of accession to the EU? What are the reasons for such an absence in their inter-connectivity?

The European Union is still building the single market at the core of European integration. Strong transportation infrastructure will promote the flow of people, goods, services, and capital, the famous “four freedoms” of the single market. It will also have spillover effects for social and economic development in the towns through which the roads and trains pass. It seems that the single market emphasizes the exchanges between old and new member states and pays less attention to the exchanges among the new member states themselves.

We cannot say that Europe is not rich. The EU has seven percent of the world’s population, provides twenty-five percent of the world’s GDP, and consumes fifty percent of the world’s welfare. Europe also does not lack money. The EU provides funding for a broad range of projects and programs covering areas such as regional and urban development, employment and social inclusion, agriculture and rural development, maritime and fisheries policies, research and innovation, and humanitarian aid. Over 76 percent of the EU’s budget is managed in partnership with national and regional authorities through a system of "shared management," largely through five big funds: the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF).

The EU’s infrastructure difficulties stem from insufficient connectivity. The European Commission features trans-European planning on roads and railways, as well as airports and maritime ports. The problem is implementation. Due to “shared management”, the implementation of road and railway construction depends on national, regional, and municipal authorities. When a local government is interested in an infrastructure project, it will apply to the EU fund and participate in the road or railway construction. If a local government is interested in another field, such as environmental or social inclusion, then its role in the plan will be postponed. Thus, the implementation of the trans-European plan has become fragmented.

The other problem of the EU is its one-size-fits-all policy. There are big differences between old member states and new member states in infrastructure, either in road or railway construction. There is still a lack of priority and coordination in promoting infrastructure projects in Central and Eastern Europe, especially in inter-connectivity. Take the latest investment plan of the EU, the “Junker Plan.” By the end of November 2017, nine percent of investment went towards transport. Among transport projects, 24 projects deal with the trans-European network, and 8 projects are for CEE countries in the EU. There is only one project that can be called a cross-border project, the Rail Baltica project. It plans to complete the rail connection among three Baltic countries in 2025 and extend to Warsaw, Poland by 2030. This is the first rail corridor from north to south in the CEE region.

The core element in China-CEE cooperation as well as the Belt and Road Initiative is connectivity. This draws from the domestic experiences of China’s development. China has achieved remarkable infrastructure progress in recent years. As the Chinese say, if you want to develop, build the road first; and as investors say, no infrastructure, no FDI. Only connected infrastructure can provide efficiency. Without connectivity, roads and railways are fragmented. Such fragmentation not only has a negative impact on the return on investment, but also has a negative impact on the social development in the fragmented region and on interest in foreign direct investment (FDI) in this region. China would like to share such experiences with Central and Eastern Europe.

Ironically, the feedback is not the same in the CEE region as in the West. Some analysts rush to criticize China’s cooperation with CEE, even with a lack of geographical knowledge of the region. They point to cooperation among China, 11 EU member states, and 5 Baltic countries. Unfortunately, the five countries they speak of are not Baltic countries, but instead Balkan countries.

China-CEE cooperation, to some extent, has served as a catalyst for the Balkans’ EU integration. When the European Commission president Jean-Claude Juncker stepped into his position, he announced that the EU has no further plans for enlargement during his term. This announcement came as sad news for the western Balkan countries currently applying for EU membership. China-CEE cooperation helped develop infrastructure in the western Balkans, which had concerned Berlin. Soon after the Berlin Process started. After several years of dialogue, a roadmap for the EU accession of western Balkan states was finalized in Trieste, Italy in July 2017. The first step of this roadmap names five infrastructure projects, replicating an approach similar to China’s. Such a catalyst will both contribute to regional development and the deeper integration of Europe if Europeans take a positive approach towards China-CEE cooperation.

At the Budapest Summit in late November 2017, the commencement of construction of the Serbian section of the Budapest-Belgrade Railway project and the tender for the Hungarian section were announced. We hope that the Budapest-Belgrade Railway project will be completed far before 2030 and will serve as a catalyst for the Rail Baltica project.

Dr. Chen Xin is the Executive Vice President and Managing Director of the China-CEE Institute in Budapest.